The Economy Needs a Strong Middle Class or It Will Fail

How about that jobs report? Did you see the jobs report? Unemployment is down. How wonderful. But what they fail to tell you is that most of these jobs are at or near minimum wage, which only allows a person to scrape by and not have any anything extra to contribute to the economy.

Despite all the positive job forecasts, our country is in serious denial that we are still in a bad recession. The income gap between the rich and the poor is widening greatly and is a sign that we are really going to be in big trouble economically unless the middle class can be rebuffed.

Why Is the Middle Class So Important?

Firstly, the middle class is vital to economic growth. Imagine you make $100,000 a year. Assume your annual expenses are $40,000. You would then have $60,000 a year that they can spend in the economy, meaning that not only can more jobs be created, but higher paying jobs can be created because there’s more circulation of money in the market to pay them with.

Secondly, the middle class make up most of the owners of small businesses around the country. Not only do small businesses create jobs, but small businesses that grow would create opportunity for higher paying jobs for the employees.

Consequences of The Dying Middle Class

Over the last few decades, the middle class continues to shrink into oblivion. This means that the majority of people in the middle class are going to fall into poverty and money circulation will be tightly controlled by the rich at the top. The top can then control jobs, wages and what happens to the economy.

Money in fewer hands would cut the circulation of money in the economy. Businesses who deal in things outside of basic necessities will suffer greatly and close down killing jobs and economic growth because people do not have the money to spend. The economy will come to a halt and things, like cell phones and cars, would become luxuries and not very affordable.

To put things more simply, imagine you have a small but productive farm. There are also a number of other small farms all around you growing crops of different kinds. A couple miles away there’s a huge farm that produces everything. The crop growth is great for years for all the farms and everyone is making money.

But then a drought hits and is so severe you and the other small farmers cannot make it. The huge farm is able to withstand the drought because it has enough capital to survive it and then sucks up the little farms leaving you and the other small farmers at its mercy.

The huge farm can now control your ability to work, your wages and how much crop output the farms can produce. The huge farm is only concerned with profit generation and pays you the minimum wage. Things you were able to buy without thinking before are difficult to buy now without credit. You now have to budget your small amount of income to not only pay for necessities, but also the credit you now have.

If the huge farm decided to raise your wages, you would breathe so much easier and be able to live better. But that would mean that the huge farm would lose income itself and greedy owners will not want that happening.

Greed Will Do You In

Since the beginning of time, there have been stories of how greed is evil and always has dire consequences for the greedy. Our economy is not immune from this concept.

If the rich decide to strangle the economy and hold onto all the wealth, they will eventually do themselves in by a suffering populace either through a bloody revolution or through social chaos.

The rich can distract and divide the public all it wants in order to take the focus off of them. But eventually their tactics will have no effect and their demise will be inevitable. History has shown that people are resilient to suffering, but there is only so much people can tolerate before frustration turns into anger and then hate.

A New New Deal

The rich have to come to terms that the current pattern they are on will eventually be disastrous for everyone, especially in a country that cuddles its guns while it sleeps. It is time that they put aside their need to be richer and begin to feed the American economy again by raising wages and circulate more money that would go towards the creation and maintaining of small businesses.

Doing so will create ample opportunity for economic growth which will only make them richer in the end, albeit a little slower than just choking the economy.

As the rich had made a New Deal with FDR after The Great Depression in order to spur the economy and send us into the fastest paced economic growth of the 20th century, it is time for a New New Deal to the same for the 21st century.

We Must Work With Another In Order to Prosper

The rich need the poor and the poor need the rich. The poor provide the labor for the rich and the rich provide the jobs and wages to the poor. But the rich and the poor really need a strong middle class. The middle class would allow for much faster opportunity for economic and wage growth which would shrink the number of poor and circulate even more money into the economy.

With people more comfortable in life, it would allow the innovators the time and resources to invent, the geniuses to flourish their brilliance and for the world to continue to be changed in ways to propel us further in advancement as a species.

There is going to be point of no return on our current path and we may very well be fast approaching it. Reversing it would be much easier, safer and more beneficial for us all.

Ramsey Judah is a broker with The Judah Group and can be reached at ramsey@TheJudahGroup.com and @RamseyJudah on twitter and instagram.